Market Watch

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

A Little Santa Red Ink

Dec 18, 2009

Market Watch with Alan Brugler

December 18, 2009

A Little Santa Red Ink Before Christmas

Corn futures were up early in the week, but dropped hard on Thursday in a “buying vacuum” and were unable to recover much on Friday. USDA reported stronger than expected weekly export sales for the reporting week ending December 10, but that wasn’t much of a market factor. The US dollar was rising, and ethanol prices were sliding despite strength in crude oil. There was also a tendency for traders to head for the sidelines, intending to re-enter after the first of the year.On Friday, a private firm projected 2010 acreage would grow to 89.5 million from 86.35 million this year. Some had expected an even larger number, although current price relationships favor soybeans in some parts of the country.

Wheat futures were also down .6% to 1.8% for the week. The bear story is well established in wheat, with USDA projecting 900 million bushels in ending stocks for May 31. That’s roughly 40% of a typical US crop already in the bin. Export sales popped up to Iraq, Japan and others, but the volume of bookings is still too light to make a dent in the pile. Argentine and Australian harvest activity is proceeding pretty much on schedule, and some Australian business with Japan has been recorded.

Soybeans lost 23 cents per bushel for the week after losing 8 cents the previous week. A 3.1% drop in soybean oil prices for the week took 13 cents per bushel out of bean value, and meal was also down $1.10/ton for the week. China was very active in the export market, with USDA making sale announcements under the daily reporting system on 4 different days. Some of the business was for 2010/11, which is interesting given the presumed bearish influence of the oncoming South American harvest.

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

Market Watch

Weekly

Weekly

11/27/09

12/04/09

12/11/09

12/18/09

Change

% Change

March Corn

$4.14

$3.89

$4.05

$3.98

-0.07

-1.67%

March CBOT Wheat

$5.70

$5.58

$5.38

$5.28

-0.09

-1.77%

March KCBT Wheat

$5.59

$5.49

$5.28

$5.24

-0.03

-0.62%

March MGEX Wheat

$5.71

$5.63

$5.43

$5.35

-0.07

-1.34%

January Soybeans

$10.53

$10.43

$10.35

$10.12

-0.23

-2.22%

January Soy Meal

$314.50

$310.70

$306.50

$305.40

-1.10

-0.36%

January Soy Oil

$40.52

$40.13

$39.57

$38.33

-1.24

-3.13%

December Live Cattle

$83.20

$81.00

$80.15

$82.05

1.90

2.37%

January Feeder Cattle

$92.50

$93.35

$91.57

$94.72

3.15

3.44%

February Lean Hogs

$67.32

$66.75

$65.42

$65.12

-0.30

-0.46%

March Cotton

$73.84

$73.82

$74.31

$75.28

0.97

1.31%

March Oats

$2.69

$2.57

$2.59

$2.60

0.01

0.48%

January Rice

$15.40

$15.72

$15.66

$14.95

-0.72

-4.57%

Cotton futures continued to advance, tacking on another 1.31% for the week. Improving economic indicators are keeping the longs interested in owning cotton in anticipation of a pickup in consumer buying of clothing. Retailers are trying to avoid heavy discounting of clothing ahead of Christmas, keeping a much tighter rein on inventory than in 2008. Early estimates for 2010 have upland cotton acreage rising 10%, but producers suggest that not all areas can grow it for 75 cents and be consistently above breakeven.

Hogs continued to move higher on the weekly continuation charts and the cash charts, but the February contract itself was down for the third week in a row and giving up a little of the premium it had to the cash hog market. Pork cutout prices drifted 20 cents lower for the week, quoted at $69.89. Hams dropped about $10 as Christmas holiday pipeline filling ended and the industry looked ahead to January retail business. Pork loin prices were up $6.80, however.

Live Cattle finally pulled out of their dive, posting a seasonal gain of $1.90 for the week. Cash cattle prices were quoted $1-2 higher for the week. Wholesale prices were higher, with choice quoted $2.04 higher on the week. Select boxes were $.90 higher for the week. Friday’s Cattle on Feed report was a little bullish on paper, with placements during November smaller than the average trade guess, and November slaughter above estimates. The bottom line is a feedlot population on December 1 that was 99.4% of last year.

Market Watch:Monday is the first day of Winter, although most of the Midwest has already looked that way for a couple weeks! USDA is done with crop progress reports, but will still update us on Export Inspections at 10 am CST on Monday morning. The monthly USDA Cold Storage report is due to be released on Tuesday afternoon. USDA weekly export sales will be out Thursday morning. Janury grain options also expire on Thursday. The CBOT and CME stop trading at 12:00 CST on Christmas Eve, with the usual exceptions for mini-contracts, options, etc. All US markets are closed on Friday for Christmas, with trading resuming electronically on Sunday night.

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